Thursday, January 14, 2010

India has been the cynosure for the past few years in the global economic arena owing to its changing inflation patterns. Between the fiscal year 2004-05 and 2007-2008, India had experienced an average growth rate of more than 9%, but the global crunch pinched the economy so hard that the economy gave in to the adverse external shocks and few sectors experienced a slump. Inflation in India 2009 stands at 11.49% Y-o-Y. The inflation rate is referred to the general rise in prices, taking into consideration the common man's purchasing power. Inflation is mostly measured in CPI.

In 2008 industry bodies, policy makers were all worried with the steadily-mounting inflation. The middle of the year augmented the tension as the majority of the population was wary of a double-digit inflation but things changed within few months. Inflation in India actually fell below 1% during the third week of March, 2009. The moderate inflation is the desirable of all too much of it or too less of it, in every way worries the policy makers.

Understanding in the right manner inflation is such a situation when too many people chase too few goods and too few services, which automatically makes the prices of the goods and services high because of the high demand. At the same time, when inflation falls below the desired mark (in the negative territory), then too few people chase too many goods and too many services, making the prices of the goods and services under-priced.

The India inflation is actually measured by the Y-o-Y variation in the Wholesale Price Index. While the inflation as measured by WPI is at present at a very low level, the inflation measured by the Consumer Price Index is at elevated levels of 9 to 10%.